This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk04: Good morning. At this time, I would like to welcome everyone to Squarespace's first quarter 2022 earnings conference call. All lines have been placed on mute. After the prepared remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply click on your own keypad. And if you'd like to withdraw your question, please press star followed by two. Thank you. Robert Sanders, you may now begin your conference.
spk06: Good morning. Today are Anthony Castellana and Marcella Martin, CFO. They will share some opening remarks and then open the call to your questions. Earlier today, we issued a press release and posted a shareholder letter to the investor relations section of our website with additional information related to our Q1 results. On today's call, we'll be referencing both GAAP and non-GAAP financial results and operating metrics.
spk02: You can find additional information on how we calculate these metrics, including a reconciliation of GAAP to non-GAAP measures in today's press release, which can be found in the investor relations section of our website. We will make forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which include but are not limited to statements related to our future financial performance.
spk06: They are defined in our most recent form to enqueue filings with the Securities and Exchange Commission.
spk02: Any forward-looking statements that we make on this call are based on assumptions of this Today, May 12, 2022, we undertake no obligations to update these statements as a result of new information or future events, except where required by law. I'll now turn the call over to Anthony.
spk10: Good morning. Thank you, everyone, for joining us today.
spk06: We are quite pleased with our first quarter results, which exceeded our guidance in multiple ways.
spk10: We currently support 4.2 million unique subscriptions across our product categories, representing significant traction amongst the audience of entrepreneurs and creators we provide tools for. Everything to sell anything campaign, which is a fantastic way to understand where Squarespace is headed and the value we provide to our customers. Our marketing campaigns centered around this concept have delivered record impressions in the first quarter. Thank you to our marketing and creative teams for elevating the Squarespace brand and powering our growth. I hope you had the opportunity to read our shareholder letter we issued this morning and take in some of the enhancements our product team has been delivering, which will help us realize our long-term goals for the business. Related to our commerce offering, we added new features to help sellers grow their customer base and are encouraged by the momentum building on top, our unique solution for hospitality and time-slotted businesses. We believe our efforts to expand our international revenue are supported by the global rollout of our Everything to Sell Anything marketing campaign and enablement of website language translation within our platform. One highlight coming up this summer I'd like to tease are some fundamental enhancements to our core content management system, or CMS, which will enhance Squarespace's core usability and expressibility to a wide range of users. We'll be talking about that over the next few weeks. As always, we continue to operate Squarespace by balancing our strong cash flow with sustainable growth, both of which Marcella will cover in more detail. Given how we are situated, we're delighted to announce that our board has approved a $200 million share repurchase program, which underscores the confidence we have in our business and our opportunities for future growth. Lastly, I'd like to thank Marcella for her leadership at Squarespace. She's been a great partner to me, helping execute on our public listing and aligning our tactical goals with our long-term priorities. Please, she will be with us through July, and we wish her the best in her next endeavor. Now I'll pass it to Maricela to share some financial highlights.
spk00: Good morning, everyone, and thank you, Anthony. We are delighted to share results with you this morning that exceeded our guidance for the first quarter of 2022. Our strong customer retention, the adoption of higher value subscriptions, and new customer additions fueled our top-line results. Unleveraged free cash flow outperformance demonstrates our commitment to deliver value to our shareholders as we continue to empower our loyal customer base of 4.2 million unique subscriptions. We exceeded the high end of our revenue guidance by approximately 2.8 million. A portion of this outperformance was the result of non-recurring drivers, including the accelerated delivery of new features at TOC, and higher than anticipated GMB. Increased transactional revenue signals a growing contribution from commerce, which further validates our investments. We expect these transactional revenues to increase even further when we deliver our wide-label payment solutions later in 2023. Some notes on the quarterly financials that we have presented in our shareholder letter. We anticipate marketing and sales expenses will decrease significantly compared to Q1 in the second half of the year. Q1 represents a high level of spend as we lean into seasonality and kick off the year with an extension to our macro everything to sell anything campaign at the Super Bowl. Research on development expenses increase in Q1 as we analyze the headcount that was incorporated last year. Non-GAAP G&A expenses are increasing about 6 million year-over-year, mostly related to D&O insurance, additional public company expenses, the consolidation of stock, and the annualization of added headcounts in 2021. Now turning to guidance for the second quarter of 2022, we expect revenue to be in the range of $208 million to $213 million,
spk01: representing 6% to 9%.
spk00: We mark the trough in our year-over-year revenue growth comparison, and we anticipate accelerating year-over-year revenue growth for the balance of 2022. For Q2, we project our unlevered free cash flow to be in the range of $33 million to $37 million, which implies
spk01: of 16.6% at the midpoint of the range.
spk00: Unlevered free cash flow margin is reducing Q2 mainly due to the timing. We are increasing our guidance for the full year 2022 for both revenue and unlevered free cash flow. With regards to revenue, we now expect that to be in the range of $867 million to $879 million. representing 11% to 12% year-over-year growth.
spk01: On our Q4 call, we outlined our expectations for non-GAAP operating expenses for 2020, and we have some updates to these expenses as we look to the rest of the year or for the remainder of 2022.
spk00: We anticipate our non-GAAP growth margin to remain at or close to the first quarter level for the remainder of 2022. However, if our transactional revenue, which is a lower growth margin, represents a higher percentage of our total revenue, our growth margin will decline slightly to 35% of the total revenue, versus the previous guidance of 30% to 35%. For research and development, we expect the 85% versus the previous guidance of 25% revenue.
spk01: This is due in the ways of working that line. For G&A, we still expect that we represent approximately 11% of revenue. We'll be between $156 million to $169 million, representing an 18.6% margin at the midpoint. Our guidance assumes significant free cash flow leverage in the second half of 2022 as we benefit from reduced marketing and sales expenses, having preloaded much of our annual expense in the first half of 2020 due to the COVID-related demand in 2020. However, we are very excited and confident about our ability to capitalize on the large market opportunities. As a reminder, during the last two years, we have had a tailwind related to the pandemic and have grown our top line 27% on a compound annual growth basis.
spk00: Those tailwinds made us even stronger as our customer base has expanded significantly and we continue to retain and serve our customers with tools that help them stay in business, through the pandemic. We reached on 2024 with regards to revenue growth into the mid to high teens, crossing the $1 billion mark in revenues in 2023. In summary, the fundamentals of our business remain. We have a long operating history of profitable growth, a consistently strong gross margin, and with a large and growing customer base. We believe the introduction of new products combined with the optimization of existing offerings will accelerate our growth in the back half of this year as we look into the future. We now look forward to your questions. So, operator, you can open the line.
spk07: Thank you.
spk06: Thank you very much.
spk04: And our first question for today comes from Matt Pfau from William Blair. Max, your line is now open if you would like to proceed with your question.
spk05: Hey, great. Thanks for taking my question, guys. I just wanted to ask in terms of how the quarter progressed. I think on the fourth quarter call, you called out a bit of softness in January. Did you see any change as you went through February, March, and April?
spk00: Hi. Thank you for your according to what we had originally expected in the quarter and what we had guided.
spk01: We saw a little bit of better news coming into, you know, into March.
spk00: And, you know, so far we are pleased with the growth that we have had in new subscriptions and overall how, you know, how the funnel has worked.
spk10: Yeah, it's great. On top of that, oh, go ahead. Sorry, just on top of that, you know, Square Chase is now comprised of multiple different revenue streams, each of which are kind of reacting differently to different phases of the pandemic and different macro world events. And so, you know, while we're really pleased with the quarter, stuff like, you know, things like the revenues coming in the top is concentrated right now. So you're seeing
spk06: a positive effect there. Got it. The reservation fee you introduced for talk, just maybe some more details on what you're seeing with that. Positive reception.
spk10: What we're doing there is in exchange for the booking fee, covering chargebacks up to a certain amount for the businesses that are on the other end of that. So, so far, so good.
spk00: Yes, and we are actually very pleased with the results that we have seen in TOC this quarter. You may remember that we talked in the last quarter about the investments that we were doing, and the TOC team has been able to deliver this enhancement ahead of what we had originally expected. So, you know, we are very happy with the investments that we are doing there because they are paying off.
spk05: Okay. Great, guys. Appreciate it. Thanks.
spk01: Thank you.
spk04: Thank you. And our next question is from Trevor Young of Barclays. Trevor, your line is now open. Please proceed.
spk02: Great. Thanks. First, on the 1Q guide, 9% growth at the high end, I think that would imply steady to accelerating year-on-year growth. and FX basis. I think FX headwinds worsen here. One, is that how you're thinking about it? And two, it looks like a little bit of a wider range for the quarter than a prior quarter. It's about a $5 million spread there. Is that indicative of a bit greater uncertainty from here?
spk01: Thank you, Trevor, for the question. On the first question, yes, the answer is yes.
spk00: And for the second question, look, I mean, what we had anticipated, what we have seen so far versus what we had anticipated is macro impact and some headwinds coming from FX. That has not played, you know, in our favor. So we are putting a little bit more conservatism in the second half of the year just because the macro environment is a little bit unstable. We, execution-wise, we have been executing according to what, you know, what we had expected. So we are, you know, quite happy with that. But unfortunately, you know, FX has moved negatively in the first quarter. And that, you know, that put us, we want to take a prudent position with that regard.
spk02: Great. That's really helpful. And then just last one, on the 200 million share with purchase authorization, should we expect some accelerated with purchases near term in light of where the stock is trading? And then you can maybe touch on your appetite for M&A right now, given that public and private market stance appear to be coming in a bit.
spk10: You know, we're excited about where the business is situated and, you know, long-term believers in it, and that's the driver behind the share repurchase. You know, we're probably not going to get into the exact strategy of that repurchase, but, you know, it's there and we intend to use it. Regarding impact on M&A, you know, I think there's three ways you can look at cash, right? We can do a dividend, which, you know, is not – I don't think well-situated discourse base right now. As you mentioned, there's M&A potential, which is definitely still on the table. We don't feel constrained from an M&A perspective with the authorization of the $200 million repurchase. Most of our M&A targets, you know, have been kind of sub-100 million, sub-70 million sort of targets. sort of move Tuck up, obviously being the exception. But, you know, we continue to pursue a number of smaller ideas and tuck-ins, and, you know, this doesn't constrain us from that in any way. So we thought it was – we were excited to be able to issue it.
spk00: Yeah, the business profile of Squarespace is really great with regards to, you know, delivery of cash. And you can see that on our confidence through the shared buyback program and also on the fact that we have increased guidance for the full year.
spk02: Great. Thank you both.
spk00: Thanks, Trevor.
spk04: Thank you very much. And our next question is from Ron Josie of Citi. Ron, your line will be open now if you'd like to proceed.
spk02: Great. Thanks for taking the question. Anthony, Marcel, I wanted to follow up on this subscriber growth and the visibility from what we just talked about. I think coming out of 4Q, we talked about more modest growth. 1Q results were certainly better in terms of sub-editions. And, Marcel, I think you just said that macro was better but still unstable. So can you help us understand a little bit more about the visibility and subscriber growth given 1Q was better, maybe better marketing and the Super Bowl campaign? And then as we think about 2Q and beyond, would it be fair to think about subscriber growth maybe following the revenue growth trajectory that you outlined? Marcelo, and then I have a quick follow-up. Thank you.
spk10: I would think that, you know, related to subscriber growth related to revenue growth, I mean, the key strategy behind what we've been doing is to – give people more ways to sell and to be more involved in our customers' transactions and how they grow their business. So from a macro perspective, a long-term perspective, I think that you should see the revenue growth outpace the subscriber growth as we get more into GMV, things like member areas, different ways to sell, different subscriptions. And so I would think those would diverge a bit.
spk00: Right.
spk10: Yeah.
spk00: Yes, definitely. And with regards to Q2, we had anticipated that the draft was going to be for Q2. But the conservatism that we are adding in the second half of the year is not related to subscriptions and additions. I mean, as I said, we have performed a little bit better. It's just that we see some headwinds with regards to the impact of the euro. approximately 29% of our revenues are denominated in Europe. So the underlying growth of the international business is still strong. This quarter has been 16% year-over-year. And we are quite happy with the progress that we have been making in countries like Australia, the U.K., Canada. We have also delivered local marketing campaigns this quarter in Germany and France. And so we are firm believers that, you know, international is a huge opportunity for us. But as the revenue size is, you know, quite significant on effects that we have seen in the first quarter.
spk06: Got it. That's very helpful. And my last question is just on pricing.
spk02: Any thoughts or any update on there, given what we just talked about, maybe the unstable macro? We talked about bundling new pricing later this year coming out. Thank you. Another couple sort of running right now.
spk06: Some of those were successful.
spk10: You see that reflected in the pricing on our front site. That gives us also more leverage when it comes to what you were referring to in the letter after your question, which is the legacy pricing updates, which we still expect to happen in the second half of this year. Frankly, it gives us more confidence that they'll be successful because we can now point at, frankly, in our view, quite modest price increases that are actually going to keep a lot of customers still below the list price that you would enter at as a new customer. And the bundling stuff is a longer-term project in full effect, still a really big believer there that we have a lot of products that we have made and are in market that are just, you know, just due to our release timeline over the years, you know, it's just behind another subscription, another subscription, another subscription. Whereas, you know, if we took these things that are already there and built, put them in the bundles, made them a little bit more accessible from a getting started perspective so that when you're signing up for Squarespace, you're signing up for basically like imagine like a business starter kit. You know, I'm somebody who wants to sell courses. I go and sign up for that via a product, which enables us to then grow with you as you use more and more of that suite.
spk06: Big believer in that. A lot of complexity there.
spk10: Much more difficult for us than just, you know, a pricing update or a price test in your customers. So still excited about both of those, but you don't see the impact of either of them in Q1 or Q2 thus far. But they will appear in the second half of the year.
spk00: Yes, and look, I mean, the success that we have had with the scheduling tools and member areas has been quite good. These are very strong products, and sometimes the net new unique subscriptions are not truly reflecting the actual growth because we count unique as actually unique. But these products have been growing really nicely, as well as marketing campaigns. The main growth on GMB, for example, has been driven by the growth in scheduling again. We are – I believe we are very well positioned to continue to, you know, lead in, you know, providing services for customers and, you know, for customers that manage, you know, time-slotted businesses.
spk10: Yeah, what Marcela is highlighting there is I think a really important point as well, which is that, you know, Depending on which competitor you pick, that GMV breakdown is very, very different. And we've said kind of over and over again on these calls and kind of as part of the marketing campaign that, yes, physical product sales are very, very important in Squarespace. We've got a big investment in that product. That will continue. But there's so many other ways to transact. You know, the appointments product, what TAC is doing for time-slotted businesses and hospitality, the transactions are happening around the appointments that are flowing through our platform that we see a big opportunity in getting onto our platform. So invoicing, basically it's all this GMV related to services that we're going to be able to tap into and that we're targeting that is a little different than if we were, you know, just pure play physical product commerce.
spk02: Thank you, guys, and wishing you the best, Marcella.
spk00: Thank you.
spk04: Thank you. Our next question is from the line of Egal Aronian from Wedbush. Egal, your line is not open. If you'd like to proceed now.
spk02: Last comment.
spk06: Is there any way to make a goal with one-layer de-burn and
spk02: Think about the growth in services and scheduling versus what you're seeing in products.
spk06: Like, are you still seeing growth in kind of, you know, these are more traditional product and content sales.
spk02: You know, obviously that's been an area that's been under a lot of pressure. So is there any way to kind of help understand the push and takes between those two sides a little bit better?
spk10: So, you know, while we don't break it out, I can make some macro comments. You know, what you're leaning into is, you know, what you saw in, you know, various other earnings releases recently, which is that there was sort of a return to some in-person commerce and, you know, a bit of a softening effect. in e-commerce, but even though it's still incredibly strong and is obviously going to be a huge thing over the next decade. So there's that. But part of what makes Squarespace really strong and well-positioned is insofar as you're like, oh, so some of the e-commerce stuff is returning to in-person. Well, our businesses like talk and time-sotted businesses and appointments, and the more we can get the transaction related to that appointment flowing through Squarespace, in many cases, which it doesn't right now, that stuff will be counter-cyclical to that other trend. And so we've just tried to set ourselves up by serving the needs of a broad array of businesses and ones that operate with services. And I think that that positioning will continue to play out very well over the next couple of years, even as these things sort of ebb and flow. Because at the end of the day, I still believe that if you take any one of these topic areas, e-commerce, invoicing, appointments, scheduling, any area where we operate, I just see them all being bigger and more online and transactions flowing more through online sources over the next couple of years. I'm really happy with how we're situated there. Thanks.
spk02: Certainly the well-roundedness is proving to be beneficial these days. Maybe we could just Talk a little bit more about the letter. And then I don't know if you'd be willing to add any more color around the CMS enhancements. But just broadly speaking, what are the areas within these new features and functionality that maybe have you guys the most excited in terms of how to contribute to the overall product? Thanks.
spk10: Sure. So there's a lot of things. Where to begin? A lot of what happens during the quarter, we frankly don't highlight on these calls because we just do a lot of blocking and tackling and a lot of releases all the time that are important features for our customers that people might not
spk06: see immediately. Let's see.
spk10: So for international new languages launching, CEPA being kind of fully rolled out, user site translation available. People asked about the insurance coverage and the book and film talk. That was a great win for us. In the Unfold product, we continue to innovate with bio sites, and we're purchasing a large number of those created. And, you know, as I was alluding to in the transcript, we have some functionality that hits as a core functionality of the content management system that we've really been working on for some time related to the website product.
spk06: It's the most difficult thing to get right, and it's the most. important thing to get right because when you get it right, you increase, again, usability, all the people using the product, and expressibility.
spk10: And I think that what you'll see is that we have a strategy in the core platform of not fragmenting that editing experience. We want fewer kinds of editing. experiences with the right level of usability for beginners, but also the expressibility for professional users and circle members so that they feel comfortable making more advanced sites on the platform. Some of that functionality is in beta right now. I hesitate to go too on and on about it in the call just because I'd rather show it with visuals because I think that just kind of suits it better. But that kind of stuff is just really important to us staying and being a world-class performer in our space. And so I'm really looking forward to that. Again, it's stuff that's been in development at Squarespace for a long time.
spk00: Yeah, I mean, I would ask because I... I don't want to disclose too much about it, but on the beta, you know, we have our Circle members. We have our Circle members, which is our beloved community of developers that give us feedback, and their reception of this product has been great so far, what we have seen in their reviews. We have received great feedback, so we are quite, quite excited about these changes that are coming, and we hope that we can announce them very soon. Yep.
spk02: Great, thanks. Looking forward to hearing more and seeing more.
spk00: Thanks, Igor.
spk04: Our next question is from the line of Gabriella Borges of Goldman Sachs. Gabriella, your line is now open. Please proceed.
spk03: Hi. Good morning. Thank you for taking my question. Anthony and Marcelo, I'm hoping you can share your observations on the folks that joined Squarespace in 2020 and 2021 during the worst of COVID. Any observations around those cohorts relative to your older cohorts, either in terms of churn or their willingness to grow and expand with the Squarespace platform? I'm curious what you're seeing relative to history in those cohorts specifically.
spk00: Thanks, Gabriela, for the question. I'm going to kick it off, and Anthony, if you want to add later. So let me talk first about the 2021 cash retention, because what we have seen for subscription cash retention is that it was stronger in 2021 versus what it was in 2020. And even at a constant FX basis, the retention was actually better. I mean, of course, as you can imagine, 2020 and 2021 are really big cohorts, so we are paying attention to how, you know, how they behave. What we have also looked at is at the 2020 cohort and how that has performed on, you know, in a two-year cash retention basis, actually a little bit less than that because it hasn't been, you know, fully two years. for all of the cohorts, but how those have performed compared to 2019. And, you know, they have performed slightly better even than 2019. So we are quite pleased with the way that so far these cohorts have been behaving, which, as I said, represent a large number of customers. And I think that, you know, this retention is a testament of the stickiness of our platform and the loyal customer base that we have. With regards to churn, we have not seen changes in churn overall. And I think one more piece of information perhaps is that we have seen this year more people coming directly to commerce versus what we saw at first in 2020 where there was people moving more from personal to commerce. But we have seen a larger adoption of commerce versus what we saw in the past with regards to, you know, upgrades. That's very helpful, Colin.
spk10: No, I mean just summarizing what Marcella is saying. You know, they're not weird cohorts. You know, it's able to last better, right? Right, right.
spk03: Understood. And, Marcela, I know it's early days, but any guidance on how we can think about the payments revenue stream in 2023 and how to model that?
spk00: Look, I mean, we are at the latest stages of choosing our partner. We have been going on due diligence for a while, and the reason is because we really have amazing partners and potential partners. The companies that we are talking to are really, really good companies, so we have to make a tough decision there. However, we have been developing companies payments from I believe we started last year, sometime in October, and the teams have been showing us a lot of progress so far. So we are confirming that we will launch payments in 2023. Most likely it's going to be in the second half of the year, but the piece that we have yet to figure it out is what's going to be our commercial policy. Because as you see, you know, in the market there is a wide range of payments and, sorry, processing fees. And, you know, that different processors charge. And so I can't, you know, talk too much about how that's going to plan. We've been working on the plans behind the scenes. But those decisions are still yet to be made because we have a year to go. And, you know, we have to continue to look at market conditions and so on.
spk03: Okay. We'll stay tuned. Thank you. Thank you.
spk04: And our next question is from the line of Josh Beck of KeyBank. Josh, your line is now open. Please proceed.
spk02: Thank you for taking the question. I have a little bit of a question, just maybe high level about presence and commerce revenue and try to put some guardrails. Obviously, there's been a large gap on commerce revenue outgrowing presence revenue between 20% and 40%. Obviously, we're going into a period where we'll be lapping talk, and there's obviously some changes there. So I imagine they'll converge to some degree, but just any guidance you can give us just on how to build out these two businesses for the remainder of the year.
spk10: So without getting into this, I think you can maybe take some of piecing together some of what we've answered in some of the other questions and sort of think about, all right, you know, Squarespace is obviously very interested in attracting customers that are transacting. and we want to be a part of that transaction. And then there's different macro trends that are going to influence people's attraction to those various business models and the performance of those various business models within the platform. So I don't know if I have any very specific guidance on how to –
spk00: Yeah, look, I mean, what I can tell you is, you know, we provided a goal in Investors Day last year, and we are, you know, from our perspective, we are on track to deliver on that goal. If there are, like, you know, significant changes that are going to, you know, move in between 2022 and – sorry, in 2022 between presence and commerce, I mean, I don't expect that it's going to be quite, you know, quite dramatic. But, look, I mean, we are very, very happy and excited with the growth that we have in presence as much as the one that we have in commerce because, you know, anybody, once we have that customer into our platform, you know, we can move that customer that decides to transact into a different, you know, a different plan.
spk02: Okay, that's helpful. And then maybe just following up on the prior question about the branded Squarespace payments offering, a question a little bit more on the go-to-market. I appreciate that it's early and you're still working on the commercial arrangements, but once you do get that offering live, Are you thinking about it as most likely that new customers coming to the platform will be the most likely candidates to adopt? Do you think you can go back to the existing base that may have a different arrangement in place and get them to adopt it? I realize it's early, so it's probably fairly preliminary, but just curious on the go-to-market there.
spk10: Sure. So, you know, no-brainer for us to make it the default for all new customers coming to the platform. I think we're going to aggressively incentivize existing customers to switch over to the payment stack. I think you know, for the most part, the feedback we've heard from people is that they kind of prefer to have everything in one place. They don't want different vendors. They trust Squarespace. You know, they want one relationship. So insofar as they kind of want that from a product experience and we can make it beneficial for them to switch over from a commercial side of things, yeah, I mean, I think it would be our goal to have 100% of all of our customers eventually using our payments stack.
spk02: Excellent, Anthony.
spk00: Thank you, Josh.
spk04: Thank you. Our next question is from the line of Brad Erickson of RBC. Brad, your line is now open. Please proceed.
spk02: Hi, thanks. Just a couple follow-ups on the subscription business. I think, you know, given the macro factors going on, there's There's just a lot of worry right now about the health of the overall SMB out there. What do you think you guys are seeing from your core, call it SMB pipeline, and what have you sort of qualitatively built into your guidance in terms of SMB headwinds essentially getting worse, staying the same, or maybe even improving from recent levels? That's one. And then secondarily, just on subscription, how do you think you guys are doing market share-wise lately in that part of the business? Thanks.
spk10: Sure, so one thing to keep in mind regarding Squarespace and kind of SMB formation is that there is going to be some correlation there, but there are a lot of people who are using Squarespace that are not really going to get picked up in that number because they're either part of, like, a creator economy and their formation of their business is going to lag, like, in corporation and all that. So just kind of getting started either with, like, unfolded buy sites or, you know, a regular Squarespace website with a testing member area and things like that. So we – service a large number of business models on Squarespace. And again, not all of them are going to get picked up in these S&D formation numbers, I don't think. And then what was the second question?
spk00: The second part of the question with regards to guidance, I want to reiterate that the reason of the additional conservatism versus the guidance that we provided during the previous call is related to FX headwinds that we, you know, that we saw in Q1. But we, you know, remain with the same plan that we had with regards to subscriptions. Yeah, subscription and new customers.
spk10: Yeah, again, for the full year, we baked in all of them. Right.
spk00: Yes, exactly. It hasn't changed compared to the previous guidance that we have provided.
spk02: Got it. And then maybe just a quick comment on how you've been doing market share-wise.
spk10: All right. Very interesting. A number of ways to kind of track that from just – I mean, there's CMS reports out there that talk about how many – URLs are powered by which platforms and all that. I think we've been doing good. I keep thinking more about what is happening behind those URLs and the value versus necessarily, like, are there 5 million sites or 6 million sites or 7 million sites, right? I mean, you could be powering the top 20,000 most valuable sites in the world, each of which process a billion in GMB, and that would be very, very valuable versus, like, the next million presence websites that may not be transacting. So I – I think about what kind of customer we attract. I think about getting people in that entry level that have a high appreciation for quality and an aptitude to grow into those bigger customers over time. That's how my mindset has been with regards to that. I referenced it earlier verbally on the script and also as an answer to one of the questions. I'm really confident that with what we're releasing in the CMS and the unification of all the commerce packages together into one sort of bundle over time that, you know, and call me biased, but I really think this is the best product on the market. And I think that it's going to be, you know, just the usability and expressibility of what we do, how we push the market forward from a visual and you know, creative standpoint remains really, really important. So I have more confidence than ever in the main tool. And at our core, we're a product company, and we invest in that and have always invested in that. And that's why I'm excited about the roadmap and what's coming out.
spk04: Got it.
spk02: Thanks.
spk07: Thank you.
spk04: Our next question is from the line of Navid Khan of Truist Securities. Navid, your line will be open if you'd like to proceed. Thank you.
spk09: Yeah, thanks. A couple of questions. So, Anthony, you mentioned earlier that you did some price tests, and then some of them were kind of the ones you tagged, and you continue to kind of do more work there. But just can you give us some color on what kind of tests these are, and are these kind of just for the new customers, meaning new customers do not may not be getting as big of a discount as they might have in the past, or is there generally an increase in the subscription pricing as well for the existing ones?
spk10: Sure. So the tests I'm referring to are for new customers only. Any adjustments that we're making to any existing subscriptions is going to happen in the later half of this year, so none of those have hit. The kinds of tests we do, just to give you some color on it, you know, re-merchandising, changing plan counts, changing the difference between annual and monthly, changing the intro price, changing the difference between the prices between plans, changing that on an international basis versus a US dollar basis. So looking through the multiple currencies and testing the elasticity there. We have other ideas around you know, prioritize support offerings that we're going to be seeing if people have an attraction to. And so, yeah, I hope that gives some color on kind of what we've been doing. And we sort of do those all the time, right, to try to figure out what the optimal point is in the market for us.
spk09: Got it. But it also sounds like the existing customers will start to pay a little bit more in the back half. Is that your statement and how big of a hike that might be? Gabe, what was the last thing you said? How big of an increase they might see existing?
spk10: Yeah, so correct. In the second half, we'll be targeting existing customers. I think what we've proven, or I hope we can infer, is that because people were New people coming in were good with an even higher price that we'll be able to say, hey, look, we're not going to necessarily increase everyone to those prices, but we can kind of inch things up a little bit and say, look, you've still got, in many cases, some version of a grandfathered price. But, you know, I think you would prove that some level of a willingness to pay on the top end.
spk09: Great. Excellent. Thank you.
spk01: Thank you.
spk04: And our next question is from the line of Aaron Kessler of Raymond James. Aaron, your line is now open. Please proceed.
spk08: Thank you. A lot of questions have been asked, but can you just talk a little bit about some of this performance of the verticals? I think you talked a little about e-commerce. Can we talk about restaurant performance as well, especially as the economy continues to reopen and any other verticals you would highlight? Thank you.
spk10: Yeah, actually, you're touching on one that I would highlight, which is that the performance within talk has seen tailwinds as of late as, you know, we've returned to a bit of a more normal environment within the hospitality space. So we're really encouraged by what we're seeing there. And, yeah, I'd say there's definitely strength there. I think, you know, in terms of headwinds, You know, people pointed out on this call just what's happening in physical e-commerce. But then, you know, Squarespace has that offset by services-based commerce and appointments and other revenue streams. So that's a bit of a feel for kind of what we're seeing.
spk00: Thank you.
spk04: And I'm afraid we have no more time for any further questions today. So I would like to thank everyone for joining the Squarespace first quarter 2022 earnings call. This concludes the phone conference and you may now disconnect your lines.
Disclaimer